Dáil Éireann Debate, Wednesday - 28 September 2016
120. Deputy John Curran asked the Minister for Finance if he will consider introducing a pilot scheme of VAT refunds on the purchases of charitable organisations; and if he will make a statement on the matter. [27617/16]
Amharc ar fhreagraNon-profit groups engaged in non-commercial activity are exempt from VAT under the EU VAT Directive. This means that they do not register for VAT and cannot recover VAT incurred on goods and services that they purchase. This non-entitlement to VAT deductibility is a general feature of VAT exemption.
A Working Group was established last year comprising representatives from my Department, the Revenue Commissioners and the Irish Charities Taxation Reform group to examine options available to reduce the VAT burden of charities. The Working Group's report is available on the Budget 2016 website. While the Report acknowledges a VAT burden on charities, I decided at the time not to introduce a VAT refund scheme for charities as the sector already benefits from a range of Ministerial Refund Orders and favourable tax treatment across a number of tax heads. Details of the existing Ministerial Refund Orders that provide some VAT relief to charities can be found at the following link:
http://www.revenue.ie/en/tax/vat/leaflets/charities.html
Requests for new Ministerial Refund Orders have been consistently refused since the 1980s primarily to maintain the integrity of the VAT system. In addition, from an Exchequer perspective, putting in place an unlimited refund scheme would be a risk due to an unpredictable level of refund claims and the limited fiscal space available. Introducing a VAT refund scheme for charities would also most likely lead to similar claims from other VAT exempt organisations, most notably sporting organisations.
However, the Programme for Partnership Government recognises the difficulties faced by community groups and charities in relation to VAT rates on certain products and commits to raising the issue at EU level. The European Commission's Action Plan on VAT was adopted on 7th April 2016 and contains a proposal to look at VAT rate policy across the EU in 2017. The Action Plan's proposal on rates will provide an opportunity to discuss VAT rates and may offer Member States more flexibility in the future in determining VAT rates applicable to goods and services. However, the Deputy will be aware that any proposed changes to the current EU VAT Directive would require unanimous agreement from all Member States.
